Disability Insurance

Disability insurance can help you replace your lost income if you become disabled due to injury or illness. The sole purpose of disability insurance is to protect you financially if an illness or injury stops you from working. A serious disability for an extended period of time will cease your income and can be financially devastating. Your income will stop but your monthly bills and expenses will not. Disability insurance will help protect your income and will provide a monthly tax-free benefit that will help you pay your bills if you become disabled.

When Do You Need Disability Insurance?

Your income is your single biggest asset and disability insurance is designed to protect it. Disability insurance provides a living benefit that can help protect you and your family from an unexpected illness or accident that leaves you unable to work and earn an income. Your disability insurance will take care of your family’s financial needs when you will not be able to do so. Your income will stop due to a serious disability but your family’s monthly bills and expenses will not stop. A tax-free monthly disability income benefit will not only cover your monthly expenses but will also help you to recover peacefully. Disability Insurance is a wise choice if:

You are the bread winner of the family
You have monthly bills and expenses
Your coverage from work is not sufficient
You are a business owner

You work in a high-risk job
Self-employed
Small business owners
Contract employees

Who Needs Disability Insurance?

A teacher who is battling depression and mental health issues
A truck driver who needs months to recover from a major truck accident
A construction worker who broke his back and need bed rest for 6 weeks
A courier driver who breaks his ankle and can’t work for three months
A financial analyst battling with breast cancer whose strength and energy is depleted by chemotherapy
The owner of a small business who needs time away from the work to recover from a heart attack

From the examples above, we can see that everyone who earns a monthly income and has dependents should buy a disability insurance plan to protect their pay cheque and safeguard their family’s financial future.

Types of Disability Insurance

Your earning power is your greatest asset. Disability insurance helps to cover your loss of income if you become disabled and provides you with a monthly tax-free benefit. There are two types of Disability insurance.

span>1. Short Term Disability Insurance
span>2. Long Term Disability Insurance

Short Term Disability Vs. Long Term Disability Insurance

SHORT TERM DISABILITY INSURANCE	LONG TERM DISABILITY INSURANCE
1. Mostly provided through your employer	1. Available through employer as well as an individual plan
2. Typically lasts for up to 6 months	2. Typically lasts for up to 2 years, depending on your policy
3. You need to use up your sick days or vacation time before short-term disability starts	3. Will begin after short term disability, sick days, vacation time and EI benefits are used up
4. You can purchase your own policy above your employer’s coverage, but benefits will be integrated at the time of claim and usually maxing out at 85% of your regular pay	4. You can buy your own disability policy in addition to employer’s coverage, but benefits will be integrated at the time of claim and usually maxing out at 85% of your regular pay
5. You may be eligible for EI sickness benefit if short term disability insurance is not available through your employer	5. Benefit may continue after 2 years, but only if you are disabled to work in any occupation depending on your policy
6. Usually replaces 70% of your income	6. Usually replaces 40-70 % of your income up to a max of $5,000 per month

What Factors Will Affect Your Disability Insurance Premiums?

Your premium will typically range between 1-9% of your annual income, but it is not the same for everyone and depends on several factors. The insurance company will take into consideration the following factors to determine your disability insurance premiums:

Age: If you buy at a young age your premiums will be less.

Gender: Females are considered more risky when it comes to disability insurance and are more expensive to insure.

Health: The healthier you are the lower your premiums will be.

Smoking Status: Smokers pay more as compared to non-smokers.

Occupation: Risky jobs and dangerous occupations may result in higher insurance premiums.

Coverage amount: The more coverage you would like to receive the more it will cost.

Benefit Period: Longer benefit periods will cost you more.

Waiting Period: The longer the waiting period, the less the premiums will be.

Definition of Disability: Any Occupation definition of disability insurance is less expensive as compared to Own Occupation.

What Points You Should Keep In Mind When Shopping Around For Disability Insurance?

1. Monthly Benefit: The monthly benefit you will receive will depend on your income as well as the type of plan you pick. Make sure you know how much of a benefit you will receive monthly. Usually it’s between 60%-85% of your income. Most plans let you pick the amount of benefit you would like to get monthly. The higher the monthly benefit amount you would like to get, the higher the monthly premiums will be.

2. Type of Plan: Check the type of plan; whether it is a Non-cancellable plan, Guaranteed Renewable plan or Conditionally Renewable Plan. A Non-cancellable plan is the most desirable option as it cannot be cancelled by the insurance provider and offer guaranteed premiums for the life of the policy.

3. Benefit Period: Make sure that you are aware of how long you are going to receive benefits if you become disabled. Typically there are three benefit period options: 2 years, 5 years, or to age 65. If you pick the 2 year benefit period then you will only get paid for 2 years, after that it will end.

4. Waiting Period: This is the period you have to wait in order to get the benefits, after you have become disabled. This is also known as the elimination period and if you are disabled during the elimination period, you will not receive any benefits; even though you are not able to work .The policy becomes expensive if the elimination period is short, such as 0 or 30 days. A longer elimination period means you have no income for a longer period, but you will be charged a lower premium. It is recommended that you select an elimination period of 60 to 90 days. The first benefit cheque is generally paid 30 days after the waiting period.

5. Cost of Living Benefit Option: This is an optional rider which can be added to the disability policies to increase your disability payment to keep pace with inflation after benefit payments begin. This is done in order to maintain the value of your benefits.

6. Definition of Disability: Some policies pay benefits if you are unable to perform the duties of your own occupation. While, others pay if you are unable to perform any job suitable as per your education and experience. Usually all insurance companies have ‘Any Occupation’ definition of disability which means after two years of disability they will ask you to get back to working any job you can – even if it’s not your regular job that you were doing before you became disabled. To avoid this scenario you should add the own occupation rider, at an additional cost which will make the policy more expensive.

7. Partial and Residual Disability: Residual disability may be a standard feature in some policies or may be added as a rider at an additional cost. Residual benefit means that you can work part-time and still receive a benefit making up for lost income. A residual benefits policy pays partial benefits based on loss of income without an initial period of total disability. Residual benefits will help you make up your income if you can only work part time.

8. Type of Coverage: Make sure you know what coverage your policy will provide in case of disability. Is it injury only coverage or will it cover both injury and illness? An accident only policy is less expensive but it is highly recommended to buy both accident and illness coverage to have full protection.

9. Limitations or Exclusions: Always review the limitations or exclusions that may prevent you from receiving benefits in future.

10. Return of Premium: Some policies have a return of premium rider available that allows you to get some percentage of your paid premiums back after a fixed period of time but it makes policies very expensive.

Disability Insurance is a must have if you rely on your paycheque for your monthly expenses. At Family Care Insurance We work with all major Canadian providers to offer you the best Disability Insurance rates. We will do all the research and hard work for you so you don’t have to! We will search through many providers to find you a suitable plan that matches your budget and unique circumstances. Let’s sit together to discuss your needs and design your personal disability insurance plan.